Wed, Apr 04, 2018 - Page 10 News List

Eurozone yields pinned near lows on equity tremors

SINGLE ACTOR:It is questionable how far the market decline would affect bond yields, as it is driven only by Amazon, a DZ Bank strategist said

Reuters, LONDON

Eurozone government bond yields yesterday held close to recent one-month lows as a global stock market dip led by US tech giant Amazon.com Inc sparked interest in safe-haven assets.

High-grade eurozone bonds were in demand, while southern European debt yields rose a touch ahead of the release of manufacturing surveys from the four largest eurozone economies.

Investors often sell bonds at the start of April as quarter-end demand unwinds, but most eurozone yields yesterday fell in early trade before trading flat as the session wore on.

“The big question is how far the current tremor in the equity market will affect bonds given it is driven by a single company — even if it is a tech giant having a huge market weight,” DZ Bank AG strategist Christian Lenk said.

Shares of Amazon on Monday fell 6 percent after US President Donald Trump attacked the online retailer over the pricing of its deliveries through the US Postal Service and promised unspecified changes.

That affected global stocks, in turn fueling bids for safer assets and 10-year US Treasury yields dropped to a near two-month low of 2.71 percent on Monday.

Yesterday, German 10-year government bond yields briefly dropped to 0.48 percent, close to a two-and-half-month low of 0.473 percent hit last week.

While economic news in the single-currency bloc has continued to be positive this year, it is no longer surprising on the upside as it was through last year.

So, any failure to meet expectations could drive further interest in bonds as investors ratchet back expectations for rate hikes from the European Central Bank.

“It will be interesting to see which way the data goes ahead of eurozone inflation numbers tomorrow [today],” Lenk said.

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